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Haitian jobs hang in the balance in IFC-funded plant

26 July 2004

The International Finance Corporation (IFC), the Bank’s private-sector arm, has brought in labour mediators in an attempt to resolve a dispute that threatens to leave hundreds of employees at an IFC-funded plant in Haiti without work. The dispute will have far-reaching implications for an upcoming IFC review of its environmental and social safeguard policies.

In early June, workers at the export processing zone plant in Quanaminthe run by Grupo M went on strike to protest continued harassment of their attempts to organise. In response to the strikes, management first said that it was prepared to negotiate with the Sokowa union. Then, citing plummeting productivity linked to the labour dispute, a series of layoffs began that eventually numbered over 350 workers – half of the labour force. Production has been relocated to company plants in the Dominican Republic.

In October 2003 the IFC approved a $20 million loan to Grupo M. In response to fears expressed by trade unions and NGOs that labour rights could be violated in the plant, the loan included a precedent-setting condition requiring the company to recognise its employees’ collective bargaining rights.

Problems first flared up in March when 31 workers were illegally fired. Grupo M was forced to reinstate the dismissed workers, and promised to protect freedom of association, establish a dialogue with the union leadership, and bring in a team of independent observers to monitor labour relations. In the intervening months, these observers noted increases in daily production quotas, intimidation of workers by the factory management and, towards the end of May, the establishment of a “climate of terror” on the factory floor.

The international trade union movement has demanded that the work force laid off in June be reinstated. However, due to claimed higher productivity in the remaining workers, Grupo M has said that fewer workers will now be required. The company has indicated to the IFC that it would be willing to re-hire from the pool of laid-off workers depending on the willingness of buyers Levi Strauss and Sara Lee to source from Haiti. The Sara Lee facility was planned to close in August with company representatives claiming that they would return if the labour disputes were resolved. Representatives of Levis have said they are “working with factory management, non-governmental organizations, and other key stakeholders to help address the situation.” Protests planned worldwide for the end of July were intended to pressure Levis “not to cut and run” from its responsibilities in Haiti.

The AFL-CIO‘s (American Federation of Labor and Congress of Industrial Organizations) Barbara Shailor called on the IFC to “insist that Grupo M immediately reinstate all of the discharged workers or face the cancellation of its loan.” The loan agreement stipulates that failure to ensure the workers’ right to form unions “will be treated explicitly as an event of default.” Twelve million of the total $20 million has already been disbursed. Some members of the Sokowa union have called for the cancellation of the last payment.

IFC representative Mark Constantine told the Bretton Woods Project that he had not heard of such calls, but felt that the implications of the IFC pulling the loan would be “very, very bad.” The company is hanging by a thread, and if it goes under, Constantine claimed it would lead to the “loss of thousands of jobs in Haiti alone.” “The IFC will stay with this until there is nothing more to be done.” Constantine was reluctant to initiate a formal investigation required to make a definitive, legally-binding decision on whether or not loan conditions had been broken: “undertaking this would reflect a complete breakdown.”

Crucially this comes as the IFC prepares to open up its environmental and social safeguards to a review process. Constantine said that the Haitian case would be informing the process. “This will make us more diligent in establishing baseline information on labour relationships and looking at the history of a company in terms of labour rights.” Civil society campaigners will be pushing the IFC to include the core labour standards of the International Labour Organization in its policies.

In a July letter sent to IFC head Peter Woicke, a coalition of NGOs called for the adoption of, amongst other things, a “human rights based approach” that protects labour rights and the development of a “set of criteria for good corporate behaviour for all potential project sponsors.” A series of consultations on the safeguard review process will take place throughout the autumn.

Haiti negotiated with international donors to finance its Interim Co-operation Framework for 2005-6. Pledges of $1.08 billion were made 20 July. Aid agencies have expressed disappointment, saying a significant portion of the funds were made in loans not grants, and will therefore push Haiti into unsustainable debt. Oxfam is calling for the World Bank and IMF to admit Haiti to the heavily indebted poor country initiative.

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The Bretton Woods Project is a UK-based NGO that challenges the World Bank and IMF and promotes alternative approaches. We serve as an information provider, watchdog, networker and advocate. Our flagship publications are the Bretton Woods Observer, a quarterly critical review of developments at the World Bank and IMF, and the Bretton Woods Bulletin, an online update of news and action on the institutions.